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Stochastic Tastes and Money in a Neo-Keynesian Economy

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  • Klaus Rainer Schenk-Hopp�

Abstract

This paper studies a monetary economy with heterogenous agents in which trade takes place in a centralized market. Each agent is a potential producer and consumer of a service (or perishable good) but has stochastic preferences that determines his taste for the good in each period in time. Money serves as a medium of exchange as well as a store of value. We prove existence of stationary fix-price equilibria with exogenously given quantity of money in which transactions can take place at non-Walrasian prices. Precautionary savings, under- and oversupply, dynamics on money holdings, and the effects of changes in the quantity of money are discussed.

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  • Klaus Rainer Schenk-Hopp�, "undated". "Stochastic Tastes and Money in a Neo-Keynesian Economy," IEW - Working Papers 088, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:088
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    References listed on IDEAS

    as
    1. Wallace, Neil, 1997. "Short-Run and Long-Run Effects of Changes in Money in a Random-Matching Model," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1293-1307, December.
    2. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
    3. Kiyotaki, Nobuhiro & Wright, Randall, 1991. "A contribution to the pure theory of money," Journal of Economic Theory, Elsevier, vol. 53(2), pages 215-235, April.
    4. Berentsen, Aleksander, 2000. "Money Inventories in Search Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(2), pages 168-178, May.
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    More about this item

    Keywords

    Microeconomic Models of Money; Stochastic Preferences; Fix-Price Equilibria; Rationing; Dynamics of Money Distributions;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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